New Lows Are Not That Far Away

The bear growls with a gap-down open on Friday.

Technical Edge — 

• NYSE Breadth: 23% Upside Volume

• NASDAQ Breadth: 28% Upside Volume 

• VIX: ~$29

Game Plan: S&P, Nasdaq

When the markets speed up, as traders we must slow down. That means:

• Remember that cash is a position.

• Sit on our hands and only take the best setups.

• Zoom out and look at the larger trends that are in play rather than getting caught up in the chop.

• Rule No. 1 is preserve capital — that’s account capital and mental capital!

Over the last week, I have been sending some additional resources alongside the newsletter. 

• Last week, we had a 10-minute video highlighting how and why the S&P may be lining up for a further push to the downside. 

• Yesterday we sent out a piece on a few longer-term setups since we have pumped the brakes a bit on short-term setups. 

  • Notice how we had many great individual stock trades in the summer, but the last portions were stopped out. That told us the setups are turning and the market is saying “caution.” It was prudent for us to ride the winners and get out while we could. 

• Later today/this weekend, I have a pretty good piece on the long-term performance of the S&P 500 (and a brief on why it’s helpful to you).

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Bonds tanked and the dollar spiked yesterday, but the market held up pretty damn well until the final 10 minutes of the day. After the late-day selloff, that selling pressure has trickled into the Globex.

Don’t forget, we have Powell at 2pm. 

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S&P 500 — ES

**I usually write up the ES futures and the SPY. But both setups are similar to one another. Feel free to extrapolate the ES setup onto the SPY or SPX charts and retool it to best fit your trading style.**

On the bigger picture setup, we have been waiting for a potential break back down to the contract lows. However, I would be a little surprised here if we don’t see some sort of bounce/stability near the 3725 to 3750 area — even if just temporarily. That was very solid support in July, with each dip being bought up at the time. 

If we do bounce, watch the short-termer timeframe trends (noted below under “ES — Zoomed In”) as potential resistance areas. After all, we’re opening significantly lower, so a bounce wouldn’t be surprising. 

If we don’t bounce, it would say a lot about the current market and put 3700 or lower is in play. The contract lows are down near 3640. 

ES — Zoomed In